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Highlights of Union Budget 2018-19 - Analysis & Important points

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Union Budget is the annual report of the Government’s finances in which revenues from all sources and outlays for all activities are consolidated.  It also contains estimates of the Govt’s accounts for the next fiscal year.

On 1st February 2018, Union Finance Minister Arun Jaitley presented the Union Budget 2018, his 5^th and the last full budget of this NDA government. This budget was also special because it is the first budget after big-ticket economic reforms like the Goods and Services Tax (GST), Demonetisation, Dynamic Fuel Pricing etc.

Major Highlights

Fiscal Situation

• Fiscal deficit is 3.5% of GDP at Rs 5.95 lakh crore in 2017-18.
• Excess revenue collected from personal income tax amounts to 90,000 cr.
• Fiscal deficit target for next fiscal: 3.3%.
• Rs 21.57 lakh crores transferred as net GST to states as against projection of Rs 21.47 lakh crores.

India’s growth story

• Indian economy is on course to achieve high growth of 8%. Economy to grow at 7.2-7.5% in second half of 2018-19.
• India grew at an average of 7.5% in the first three years since 2014. It is now a $2.5 trillion economy and the seventh largest in the world.
• Government moves to remove stamp duty from financial transactions.
• 41% more returns were filed this year, which shows that more people have joined the tax net. Tax payer base has risen from 6.47 crore in 2014-15 to 8.27 crore in 2016-17.

Sector-wise Analysis

 Personal Tax

• Personal Income Tax: No change
• Relief to salaried tax: Standard deduction increased for transport and medical reimbursement to Rs 40,000 from Rs 15,000. However conveyance expenses to get benefit of Rs 19,200 under transport allowance will stant discontinued.
• Long term capital gains (LTCG) over Rs. 1 lakh to be taxed at the rate of 10%.
• Health and education cess increased to 4% from current level of 3%.

     For Senior citizens

• Rs 50,000 additional benefit to senior citizens for investment in mediclaim.
• For senior citizens, no TDS on FD, Post Office interest upto Rs. 50,000.
• For senior citizen, limit for investment in LIC schemes doubled to Rs. 15 lakh.

Corporate Tax

• 100% tax exemption for the first five years to companies registered as farmer producer companies with a turnover of Rs. 100 crore and above.

Custom Duty/Cess

• Proposal to increase the health and education cess to 4%.
• Imported electronics, including phones and TVs, will now get more expensive as government proposes to increase custom duty on mobiles from 15% to 20% and on some other mobile parts to 15%, and some parts of TVs to 15%.
• Customs duty on raw cashew cut form 5% to 2.5%.

Telecom

• Government proposes to set up 5 lakh wifi-hotspots that will provide internet to five crore rural citizens in 2018-19.
• Government provided Rs10,000 crore for creation and augmentation of telecom infrastructure in 2018-19.
• Department of Telecom will support the setting up of indigenous 5G centre at IIT Madras.

Textile

• Rs 7,148 crore allocated for textile sector

MSME Sector

• Target of Rs. 3 lakh crore for lending under PM MUDRA Yojana.
• Reduced corporate rate of 25% to firms with 250 cr turnover.

Banking

• Recapitalisation will pave the way for public banks to lend an additional Rs 5 lakh crore.

Startups

• VCFs, angel investors to get new measures for growth and new tax rules to increase funding of startups.

Railways

• Rs 1,48,528 crore is the capital expenditure for the Indian Railways for 2018-19… All trains to be progressively provided with WiFi, CCTV and other state-of-the-art amenities.
• All railways stations with more than 25,000 footfalls to have escalators.
• 12,000 wagons, 5160 coaches and 700 locomotives being procured. This is significant achievement of physical targets by Railways.
• Focus will be on safety, maintenance of railway tracks, increase in use of technology and fog safety devices.
• Redevelopment of 600 major railway stations has been taken up; Mumbai transport system is being expanded; suburban network of 160 km planned for Bengaluru.
• Foundation stone of the bullet train was laid in September 2017. An institute is coming up in Vadodara to train the manpower required for the high speed railway projects.
• 3600-km of rail track renewal targeted in coming year.
• All trains to increasingly have WiFi & CCTVs.
• 600 railway stations to be redeveloped.
• 150 km additional suburban railway network at the cost of Rs. 40,000 cr.

Agriculture

• Credit for agriculture sector to increase from 10 lakh crore to 11 lakh crore
• Agri-Market Development Fund with a corpus of Rs 2000 crore to be set up for developing agricultural markets.
• 1290 crore allocation for bamboo sector.
• Operation Green allocation Rs. 500 crore for promoting farmer produce organisations.
• Grameen Agricultural Market (GRAM) will provide farmers a means to sell directly to buyers.
• The focus is on low-cost farming, higher MSP. Emphasis is on generating farm and non-farm employment for farmers.
• The Minimum Support Price (MSP) of all crops shall be increased to at least 1.5 times that of the production cost.
• The government will ensure payment of full MSP even if farmers sell below MSP.
• 10,000 cr for fishery development fund and animal husbandry fund.
• Kisan credit card to be extended to fisheries, animal husbandry farmers.
• 100% tax deduction for farmer production firms with 100 crore turnover.
• APMCs will be linked with ENAM. 22,000 Gramin agricultural markets will be developed.

Health

• Ayushman Bharat program – About 10 crore poor and vulnerable families will be targeted under healthcare protection scheme, which will offer up to Rs 5 lakh per family. This will be the world largest government-aided programme.
• As per the national health policy 2017, health and wellness centres will be launched. Around 1.5 lakh centres will provide free essential drugs, maternal and child services. The finance ministry allocated Rs1200 crore for this flagship programme.
• Rs 1,200 crore for the flagship programme in health wellness centres.
• TB patients will get Rs 500 per month for nutritional support.
• 600 crore for nutritional support to all TB patients.

Infrastructure

• To spend 14.34 trillion Indian rupees ($225.50 billion) on rural infrastructure.
• NHAI would transfer the road projects into special purpose vehicles to use innovative structures such as infrastructure trusts for fund mobilisation.
• Government to use select InvITs for infrastructure funding.
• System of toll payment by cash being replaced by electronic payments.
• Smart City mission: 99 cities selected with outlay of Rs. 2.04 lakh crore.
• 5 lakh WiFi spots for benefit of 5 crore rural citizens.
• 10 tourist cities to be developed into iconic tourist destinations.

Connecting India– Road/Air

• Bharatmala project approved for better road connectivity at Rs 5.35 lakh crore.
• UDAN will connect 56 unserved airports in India.
• Airports Authority of India now has 124 airports; this will be expanded by 5 times. Aim of 1 billion trips a year.
• Airport capacity to be hiked to handle 1 billion trips per year.

Education

• 1 lakh crore over 4 years for initiative for infra in education.
• At least 24 new government medical colleges and hospitals will be set up by upgrading existing district hospitals.
• Goal of one medical college per every three Parliamentary constituencies.
• 1,000 best B.Tech students to be made PM research fellows — to do PhDs in IITs and IISc. They will spend few hours every week teaching in technical institutions.
• Eighteen new schools of planning and architecure will be set up.
• Proposal of Railway University in Vodadara.
• Eklavya schools for tribal children.
• Government to launch ‘Revitalising Infrastructure and Systems in Education by 2022.
• Integrated B.Ed programme to be initiated for teachers, to improve quality of teachers.
• Technology will be the biggest driver in improving education. To work with states to provide more resources to improve quality of education.
• Moving from blackboard to digital board.

Skill Development & Training

• Training for 50 lakh youth by 2020.

Science & Tech

• National program to direct efforts in Artificial Intelligence.

Women

• 76% of MUDRA loans for women.
• Contribution of 8.33% to EPF for new women employees by the govt for three years while the employer’s contribution will continue to be at 12%.
• Government proposes to increase the target of providing free LPG connections to 8 crore to poor women.
• 8 crore rural women to get free gas connection through Ujjwala yojana.

Poor, backward and vulnerable section

• By 2022, every block with more than 50% ST population and at least 20,000 tribal people will have ‘Ekalavya’ school at par with Navodaya Vidayalas.
• Allocation of Rs. 56,619 crore for SC welfare and Rs. 39,135 crore for ST welfare.
• Allocation for national livelihood mission: Rs. 5750 crore.

Other Important proposals

• Government doesn’t consider cryptocurrencies as legal tender or coins.
• The govt aim that by 2022, all poor people have a house to live in.
• Government plans to construct 2 crore more toilets under Swachh Bharat Mission.
• Total 187 projects sanctioned under the Namami Gange programme.
• Air Pollution in Delhi-NCR is a cause for concern, special scheme will be implemented to support governments of Haryana, Punjab, Uttar Pradesh and Delhi-NCT to address it and subsidise machinery for management of crop residue.
• Proposal to develop 10 prominent tourist destinations as Iconic tourism destinations.
• AMRUT programme will focus on water supply to all households in 500 cities. Water supply contracts for 494 projects worth 19,428 core awarded.
• Emoluments of the President to be revised to Rs 5 lakh per month & emoluments of the Vice-president to be revised to Rs 4 lakh per month.
• Cash payments of over Rs. 10,000 by trusts, institutions to be disallowed.
• Disinvestment target of Rs. 80,000 crore for 2018-19. 24 Public Sector Units to be divested.
• United India Insurance, Oriental Insurance and National Insurance will be merged and then listed.
• Gold monetisation scheme will be revamped to allow people to open hassle-free gold deposit accounts.
• Outward Direct Investment (ODI) from India has grown to US$15 billion per annum.
• Loans to self-help groups will increase to ₹75,000 crore

Key Focus Areas  Agriculture, Health, Education and Employment are the main focussed areas of the Union budget 2018-19.

Important Glossary

Fiscal Deficit -When the government’s non-borrowed receipts fall short of its entire expenditure, it has to borrow money form the public to meet the shortfall. The excess of total expenditure over total non-borrowed receipts is called the scal decit.

Revenue Deficit -The difference between revenue expenditure and revenue receipt is known as revenue deficit. It shows the shortfall of government’s current receipts over current expenditure.

Primary Deficit -The primary deficit is the fiscal decit minus interest payments. It tells how much of the Government’s borrowings are going towards meeting expenses other than interest payments.

Capital Budget – The Capital Budget consists of capital receipts and payments. It includes investments in shares, loans and advances granted by the central Government to State Governments, Government companies, corporations and other parties

Revenue Budget – The revenue budget consists of revenue receipts of the Government and it expenditure. Revenue receipts are divided into tax and non-tax revenue.

Tax revenues constitute taxes like income tax, corporate tax, excise, customs, service and other duties that the Government levies.

Non-tax revenue sources include interest on loans, dividend on investments.

Budget Estimates – Amount of money allocated in the Budget to any ministry or scheme for the coming financial year.

Guillotine – Parliament, unfortunately, has very limited time for scrutinising the expenditure demands of all the Ministries. So, once the prescribed period for the discussion on Demands for Grants is over, the Speaker of Lok Sabha puts all the outstanding Demands for Grants, Whether discussed or not, to the vote of the House.

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